If you think the market sell-off is close to being done, think again.
Many of the world’s most prominent investors have warned about this sell-off over the last few years.
But here’s some interesting information from the people on the ground, specifically the Chief Financial Officers running the world’s largest private companies.
CNBC took a survey of its Global CFO Council, a group that “represents some of the largest public and private companies in the world, collectively managing nearly $5 trillion in market value across a wide variety of sectors.”
According to the survey taken last week, over half of the council firmly believed that the Dow will drop by another 8%, a 2,000 point tumble bringing it to 23,000.
The number one reason for this plunge: the US trade war with China.
The interesting thing about this survey is the sudden shift in sentiment that has taken place since Q1 2018.
If you look at the chart, you can see the increase in optimism leading up to the current plunge.
If anything, this correlates to public sentiment, reaffirming the classic pattern in which investors are most optimistic before a major crash. Take a look:
The Negative Effects of the Trade War
Why the sudden shift in sentiment? It’s all about trade tensions and its effects toward slowing the economy.
How so? The tax cuts that initially boosted optimism and the economy will eventually wear off. Interest rates will rise. In addition to these factors, corporations are worried about another round of tariffs against China.
This last point, the ongoing trade war, takes the top spot among CFOs who participated in this survey.
Note that last week’s crash on Monday is partly to Vice President Mike Pence’s speech on Sunday. Pence mentioned that there would be to the $250 billion tariffs on Chinese goods unless Beijing makes changes its ways.
Following trade concerns, the next two biggest worries were consumer demand and Fed policy. Although 60% of the CFOs expect another rate hike in December, concerns increased only slightly (probably because it’s already expected).
The increasing likelihood for a major downturn should come as no surprise. The fundamental factors contributing to it have been present all along.
Though the message may have seemed alarming at first, note that it becomes slightly less alarming when major investors--Bridgewater Associates, Bank of America, Goldman Sachs, among others--begin sounding the alarm.
When CFOs of major corporations begin sounding the alarm, the warning shouldn’t be anything new, as they are not so much predicting as observing the financial realities that are unfolding in their day-to-day operations.
By the time the general public begins sounding the alarm, it’s often too late. And as soon as the public begins dumping their equities assets, it's possibly even time to go long the market once again in anticipation of the next bull market cycle.
Since no investor or market expert is a soothsayer, there’s no point in timing the market. You can’t time your market entries, but you can always hedge your timing.
Should you begin dumping your stocks, buying bonds, buying gold? That’s up to you.
There’s another option. Why not be open to all possibilities? Why not play both aggressive and defensive positions? Why should you have to jump from one position to the other, especially if everyone’s timing (experts included) is generally poor to bad?
Why not maintain an all-weather “permanent portfolio” of stocks, fixed-income, cash and gold divided into even quarters?
If you’re afraid of missing out on a big move, losing value in your assets, and protecting your purchasing power from inflation, then why not have it all set up?
Not sure how to set it up? Call one of our specialists, and we’ll help you protect your wealth and position your portfolio for all-weather growth.
Whatever you decided to do, note that now is the time to hedge your assets. The bear is at the doorstep. And by the time most investors will realize it, their wealth will have already been devoured.
There’s no reason to let this happen to you if you join the smart money and hedge.